Wednesday, 1 December 2010

Planning for 2011 – Managing Government Budget cuts.

The Government plans to cap benefit payment to income supported payments. The way the Government are implementing this could cause severe financial hardship to certain landlords.

Government proposal outlines a cap in benefit payments rather than a blanket percentage decrease in payments to tenants. What this means to us as landlords is, that if you’re a landlord who owns properties in areas where rental payments are much higher than the national average, areas such as London and the South Eastern counties, then you are likely to suffer severely by the cut in benefit payments to your tenants. The opposite applies to landlords who rent out properties in areas where rents are at the national average or below, these areas are largely unaffected and therefore much safer to be investing in. In my Kevin Green Wealth training, I have always taught investors to buy in high rental yield areas, where property prices are under the stamp duty threshold and benefit payments are sustainable, therefore my students are safe. But how can we help anyone else who’s facing a cut? I suggest that you consider the following actions; 1- Assess whether the private rental market is sustainable, therefore not requiring income supported tenants. 2 – Consider selling the properties you have which will be affected, and reinvest in the unaffected areas. 3 – You could lease option to your tenants and sell them the property. 4- Consider Social housing as an alternative strategy, or other direct contracts with government for guaranteed fixed term rental.

It is my strong feeling, that this massive change in government policy will remain and cause tenants to migrate from the high price city centre locations, to the more affordable lower rent level areas of the UK. This may have an effect in reducing property values further in the high priced areas, yet strengthening property values in the low price areas.

Use the coming of the New Year to readjust or set your new goals, including business goals and lifestyle goals. The environment is changing fast around us, and we need to keep up to speed with all aspects. Remember small cash creation businesses, can provide a stable stream of income and are generally a lot safer than relying on just a job.